Should We Update Our Disability Insurance Program?

Former Speaker of the House John Boehner. (Photo: Win McNamee/Getty Images)

Last week's bipartisan budget agreement was hailed by John Boehner as "the first significant reform to Social Security since 1983"; proof, according to the Los Angeles Times, that Social Security remains the "third rail" of American politics. Among its purported accomplishments, the new budget apparently saved the disability program from the precipice of disaster and introduced new measures to prevent fraud. Here's the thing though: A rare opportunity to actually improve the program was lost.

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The deal averted a potentially devastating cut to the more than 10 million people who receive benefits from the Social Security Disability Insurance program—perhaps our country's most important, yet least talked about, social welfare program. The Trust Fund supporting the program was projected to run out of money by the end of next year. Had the deal not gone forward to restore the program's financing (albeit only for another six years), a 19 percent benefit cut could have materialized. Yet, in making no substantive changes to the program, a critical chance to reform the program and to help millions of people with disabilities return to work was also missed.

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Rather than waiting six years for the next Trust Fund crisis, politicians from both parties would be wise to re-focus their efforts on improving our Disability Insurance program to help people return to work.

Current policies fail to provide adequate incentives and support to help those with disabilities stay in and get back to work. Data shows that 40 percent of DI beneficiaries want to return to work, yet less than four percent actually do. DI beneficiaries experience systematic disincentives for returning to work, including the lack of early intervention options, access to rehabilitation services, and the pervasive fear of giving up benefits for an unstable labor market. Rather than waiting six years for the next Trust Fund crisis, politicians from both parties would be wise to re-focus their efforts on improving our DI program to help people return to work.

The economic status of people with disabilities has been declining for years despite the adoption of the Americans With Disabilities Act, which prohibited employers from discrimination against people with disabilities. Since 1990, employment rates for people with disabilities has fallen by four to seven percentage points every five years, while the rate for people without disabilities has remained constant. The rapidly aging American population can partially explain this decline; as we get older, we are more likely to experience a work-limiting disability. But research also points to declining wages for low-skilled workers, which makes DI benefits more attractive for many people with health conditions who are struggling to provide for themselves and their families through their jobs. Having an impairment can lead to a number of extra costs that most people without disabilities do not have, such as costly medical, transportation, and caregiving expenses. It's not that people who end up on DI don't want to work; they simply can't afford to work in increasingly insecure employment situations.

The list of policy solutions that could have been adopted is a long one. We could have increased wages by expanding the earned income tax credit to cover people with disabilities. We could have created incentives for employers to accommodate their workers with disabilities. We could have introduced transportation vouchers to help people with disabilities get to and from work. We could have developed early intervention health services for people at risk of becoming long-term disabled. We could have introduced a temporary rehabilitation benefit program targeted at individuals on the border of DI eligibility.

Other countries have adopted innovative disability policies. In Austria, a recent reform provides "rehabilitation before pension," thus treating permanent disability benefits as an option of last resort. In Denmark, young people under the age of 40 are ineligible for permanent disability benefits and instead receive substantial support in their return to work. In the United Kingdom, a temporary disability benefit provides personalized employment services to claimants with impairments who also possess remaining work abilities. Similar reforms in the Netherlands and Sweden have proven successful at helping people with disabilities return to paid work. What makes these countries distinct from ours is that they have all fundamentally reformed their support systems to help people with disabilities get back to work.

Rather than considering any of these options, we are left with our current DI program, which is woefully ineffective at helping beneficiaries return to work. Let's not wait another six years to make disability benefit reform a reality.